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20 Mar, 2008 08:28

Russia finally defines strategic sectors

Russia has finally decided how it will let foreign firms invest in its economy. The new law has been a long time coming.

The Russian government is to set out the rules under which foreign investors will be able to work in strategic sectors of the economy.

On Friday the State Duma will adopt a bill regulating foreign investors’ access to strategic sectors of the Russian economy.

The sectors defined as strategic range from energy and the natural monopolies to aerospace and the mass media.

“The same laws exist in all developed and democratic countries, for example, in the US and in many European countries. We just have to protect our own market,” explained Martin Shakkum from the Russian State Duma Constuction Committee.

The draft law bans firms controlled by foreign governments from controlling Russian companies in strategic industries, and it requires investors to get permission from the Russian authorities if they wish to take a stake in a Russian firm in strategic sectors.

Some say the law looks protectionist, but analysts believe it’s a temporary measure.

“For the present it’s pretty natural, although it’s probably not completely beneficial, and I suppose that sooner or later many limits to those sectors which are now called strategic will be relaxed,” said Evgeny Nadorshin, Chief Economist of Trust Bank

Russian lawmakers stress the law will not block investors from strategic industries.

“It is not a prohibitive law. It has restrictions only on the exploration of mineral deposits of federal importance such as oil and gas and a number of rare metals,” added Martin Shakkum.

Some changes were made to the final draft of the law. Power grids, telecom companies and Internet providers are no longer classed as strategic.

Investors are now waiting to see how the law will work in practice, to see what they can and cannot buy in Russia.